UCC Liens From MCA Funders: What They Mean and How to Get Them Removed
By Century Debt Relief ·
Many business owners do not realize a UCC lien has been filed against their business until they apply for a loan and get turned down. If you have taken a merchant cash advance or business loan, there is a good chance at least one lien is on file with your state. It can affect your ability to get new financing, and it can give the funder real leverage if you fall behind.
Here is what a UCC lien is, why funders file them, how to find the liens on your business, and how to get them removed.
What is a UCC lien?
A UCC lien is a public notice that a creditor has a security interest in some or all of your business assets. It is created by filing a form called a UCC-1 financing statement, usually with the Secretary of State in the state where your business is organized. The name comes from Article 9 of the Uniform Commercial Code, the set of rules states use for secured business transactions.
A UCC lien is not a judgment and does not mean you have been sued. It tells other lenders that this creditor has a claim on the listed assets and stands ahead of them in line.
Why MCA funders file UCC liens
Most merchant cash advance funders file a UCC-1 at or shortly after funding, before any payment is ever missed. It is a standard part of the deal. Many of these filings are blanket liens that cover all business assets, including accounts receivable, inventory, equipment and future receipts. The lien protects the funder if your business defaults or takes on other debt.
How a UCC lien affects your business
It can block new financing
Banks, SBA lenders and many alternative lenders search UCC records before approving financing. An existing blanket lien can lead to a denial or a demand that the lien be paid off first.
It can show up on business credit reports
UCC filings commonly appear on business credit reports. They generally do not appear on personal credit reports, but a personal guarantee can still expose you personally if the debt goes unpaid.
It gives the funder leverage if you default
If you fall behind, a funder with a UCC lien may send a notice of assignment to your customers, directing them to pay the funder directly instead of your business. This can cut off your cash flow quickly. It is one of the most damaging steps a funder can take, and one of the most important reasons to deal with MCA debt before a default.
It can outlast the debt
Even after an advance is paid off, the lien stays on the public record until the funder files a termination. Funders do not always file terminations promptly.
How to check for UCC liens on your business
- Go to the business or UCC search page on your state Secretary of State website.
- Search your exact legal business name, plus common variations and any former names.
- Download each filing and note the secured party, filing date, file number and collateral description.
- Repeat in any other state where your business is organized or has been registered.
Compare what you find with your records. Look for liens from funders you have already paid off, duplicate filings, and liens you do not recognize.
How to get a UCC lien removed
If the debt is paid in full
A lien is released by filing a UCC-3 termination statement. Under Article 9, once there is no remaining obligation, the business can send the secured party a written demand to file a termination. The secured party generally must file it within 20 days of receiving the demand. If it fails to do so, state law typically gives the business a path to file the termination itself and may allow it to recover damages. Rules vary by state, so confirm the details for your state.
A practical checklist:
- Get a written paid-in-full letter from the funder.
- Send a written, dated demand for a UCC-3 termination, and keep proof of delivery.
- Check the state database after a few weeks to confirm the termination was filed.
- Follow up in writing if it has not been filed, and consider legal help if the funder does not respond.
If you are settling the debt
Make the lien release part of the deal. A strong settlement agreement should require the funder to file a UCC-3 termination within a specific number of days after the final payment. Do not rely on a verbal promise. Learn more in our guide to how business debt settlement works.
If the lien is wrong
If a lien was filed without authorization, lists the wrong business, or relates to a debt you never owed, you may be able to file a correction statement and demand removal. Filings made in bad faith can create legal liability for the filer. An attorney can help if the funder refuses to cooperate.
If you do nothing
A UCC-1 financing statement generally lapses after five years unless the secured party files a continuation. Waiting it out is rarely a good option if you need financing sooner.
Dealing with liens as part of MCA relief
For businesses with multiple merchant cash advances, UCC liens are usually one piece of a bigger problem. A plan that resolves the debt should also clear the liens, so your business can qualify for normal financing again. See our guide to MCA debt relief options, or contact Century Debt Relief for a free review of your advances and liens.
Frequently asked questions
Is a UCC lien the same as a judgment?
No. A UCC lien is a public notice of a creditor's security interest. A judgment requires a lawsuit and a court order. A UCC lien alone does not allow a creditor to freeze your bank account.
How long does a UCC lien last?
A UCC-1 financing statement generally stays effective for five years from filing. The secured party can extend it by filing a continuation statement before it lapses.
How do I get a UCC lien removed after paying off an MCA?
Ask the funder in writing to file a UCC-3 termination statement. Once no obligation remains, the funder is generally required to file it within 20 days of your demand.
Does a UCC lien affect my personal credit?
UCC filings generally appear on business credit reports, not personal credit reports. A personal guarantee on the underlying debt can still affect you personally if the debt goes unpaid.
Can an MCA funder contact my customers?
If you default, a funder with a lien on your receivables may send a notice of assignment instructing your customers to pay the funder directly. Getting help before a default is the best way to prevent this.